Limelight Is On a Roll

Over the weekend, CDN upstart Limelight Networks (NASDAQ:LLNW, news, filings) won another big court victory. The ruling sets aside last year's verdict, in which Limelight was said to be infringing on Akamai's patents and was penalized some $45 with more perhaps to come. Limelight now therefore expects to reverse expenses of $66M it has accrued for it, although I'm not sure when that actually comes into play on the balance sheet - Akamai (NASDAQ:AKAM, news, filings) will almost certainly appeal. That's a nice sum of money to free up, but far more important is that the dark clouds of litigation that have been hanging over the company seem to be turning into fluffy white ones. At least, they look a lot less threatening at the moment.

It wasn't long ago that many, including myself, considered Limelight at imminent risk of being crushed by such patent litigation. In fact, the whole field of CDN challengers seemed to share that risk, Limelight was just the biggest threat that did not have a wide patent umbrella for protection and therefore the biggest target. Earlier this year though, Limelight won a decision against Level 3 Communications (NYSE:LVLT, news, filings) and when combined with this new ruling, the way forward for competitive CDNs seems a bit clearer. Might it be that the scales have shifted? Have the courts acknowledged limits on claims of 10 year old hi-tech patents which only verbally resemble processes that have changed so much since then?

In other words, might it be that this very litigious line of business might need a lot fewer lawyers industry-wide? Well, let's not go that far just yet. While they haven't born fruit lately, there's not much to prevent further lawsuits and every case is different. All you need is a different jury and another unclear patent. That said, legal expenses are expenses, and new lawsuits are discretionary expenses that many can probably do without.